Getting Israel to Yes

Over the opposition of much of the world, President Bush decided to overthrow Saddam Hussein as part of the US campaign against terrorism. Now he faces a new decision that will be the next big step in that campaign.

Mr. Bush must decide whether to use a strong economic lever to insist that Israel abandon most of its settlements in the West Bank and Gaza Strip to help achieve the US goal of creating a Palestinian state as a way to dampen Arab resentment of the US.

Israeli Prime Minister Ariel Sharon says any dismantling of Jewish settlements on land occupied by Israel since 1967 is "not on the horizon." But without such action, prospects are slim for the success of the Bush-driven diplomatic road map to end the 55-year-old struggle between the Israelis and the Palestinians.

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Mr. Sharon objects to many aspects of the road map, which calls for an end to violence and the creation of a Palestinian state within three years. Palestinian leaders have backed the plan.

More than a decade ago, the first President Bush faced a similar choice in dealing with Israel. Faced with pressure at home from hard-line Israel supporters, the elder Bush decided not to use the economic leverage of the US.

With his high standing in the polls, the younger Bush has more room to use ample US foreign aid to Israel as a negotiating lever. This time it is clearly in the US interest to do so.

What's more, with Israel mired in a deep recession and high unemployment - caused in part by nearly three years of Palestinian suicide bombings - US aid speaks with a loud voice.

Congress acted last month to help the Israeli economy with a $1 billion grant in military assistance and $9 billion in loan guarantees. That's on top of the usual $2.7 billion in annual aid to Israel.

The $1 billion grant was automatically made available to Israel. It even allows $263 million of that money to be used to buy Israeli military goods. No leverage there.

But the loan guarantees, available over three years, depend on a presidential determination that Israel is following proper economic policies to restrain its budget, shrink the public sector, and encourage the private sector. Bush can, if he chooses, withhold portions of the loan if Israel continues to spend money on the heavily subsidized Jewish settlements.

Israel needs the loan guarantees to cover its sizable budget deficit and help repay older Israeli bonds.

Whether Bush wants Middle East peace enough to put pressure on Sharon and risk his own reelection in 2004 remains a question. White House political strategists may be hoping for votes from Jewish voters. Many, if not most, of them are no fans of Israeli settlements.

European financial pressure on Yasser Arafat forced him to relinquish some power last month. Now it's the Americans' turn to use their clout to force the Israelis to compromise.

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